Cuts deepen crisis of the dole queues

Britain faces "five more years of pain" on unemployment, with the North-South divide widening further than ever as government cuts bite.

That was the bleak prediction of forecasters at the Centre for Economic and Business Research (CEBR) in a report on the labour market predicting joblessness in many regions hitting levels not seen since the early 1990s recession under John Major.

The CEBR is braced for rising joblessness across every region until 2016 – except in the South-east, East and London. The worst-hit regions will be those most reliant on public-sector jobs as deficit cuts come to bear, the survey indicates. In the North-east, which has the biggest exposure to the cuts, one in eight people could be out of work in four years' time as the jobless rate hits a 20-year high of 13 per cent.

Scotland and Wales, both big state employers, are also in the firing line. In Northern Ireland, where almost three in 10 are employed by the state, the jobless rate could hit a high of 10.7 per cent, the worst since the 1990s recession. Across the UK unemployment will rise from 8.7 per cent this year to 9.2 per cent in 2016.

The figures come as the independent Office for Budget Responsibility predicts 730,000 job cuts in the public sector over the six years to 2017 – although it expects overall employment to rise by one million during the period thanks to a recovering private sector.

The CEBR has a far bleaker view on the jobs market overall with unemployment of 9.2 per cent forecasted by 2016 – well ahead of the 6.3 per cent pencilled in by the OBR.

The economist Rob Harbron said: "The outlook is tough for UK households, particularly those in places with a high dependency on public-sector employment. Family budgets are being squeezed between the pressures of rising unemployment, low earnings growth and stubbornly high inflation."

The picture in the North contrasts with a far more buoyant picture down south as confidence in the South-east is boosted by the fastest growth of any region in the UK, according to the CEBR. The South-east's lowest dependency on the public sector also shields workers from the worst of government budget cuts, leaving unemployment at 5.6 per cent in 2016, the lowest of any region and well below the national average.

George Osborne yesterday said the Government would not waver in its austerity programme, even claiming that the electorate remained firmly supportive. "The national mood is now very much behind the deficit plan,"the Chancellor told the BBC's Andrew Marr Show.

Mr Osborne attempted to diffuse the rising feeling that Europeans were becoming sick of austerity, hence the strong showing of French socialist Francois Hollande. The Chancellor claimed Mr Hollande, who wants to renegotiate the European agreement on cuts, was pro-austerity.